Shares of interest rate sensitive sectors such as banking, automobiles and infrastructure have rallied in late noon trades ahead of the Reserve Bank of India (RBI) mid-quarter review of monetary policy on Monday, June 18.
The Bombay Stock Exchange (BSE), banking share index Bankex, Auto and Realty indices are trading higher by 2% each, compared to 1.3% rise in the benchmark index Sensex at 1430 hours.
Tata Motors, Maruti Suzuki India, Mahindra and Mahindra and Hero MotoCorp from auto, ICICI Bank, HDFC Bank and Kotak Mahindra Bank from banking and DLF, HDIL and Indiabulls Real Estate from realty are trading higher by more than 2% each.
“The RBI in its mid-quarter review of monetary policy on June 18 is widely expected to announce steps to boost sagging economic growth, which dipped to nine-year low of 6.5% in 2011-12,” according to the report.
A K Prabhakar, Senior VP-Equity Research, Anand Rathi Financial Services expects a 50 bps CRR cut on Monday, which would ease the acute money market liquidity shortage. A symbolic 25 bps repo-rate cut is possible as RBI has little choice but to ease monetary policy.
However, Angel Broking in its report stated that “The headline inflation accelerated to 7.6% in May on year-on-year basis, driven by higher food and fuel prices, making it harder for the RBI to cut interest rates aggressively.”
